(Intro: This post continues a series of personal growth focused entries. It doesn't have much direct, applicable SEO value, so feel free to skip if that's what you're seeking)

I've learned more in the last 9 months than at any previous time in my life - about myself, about this company and about the worlds of venture capital, entrepreneurship and startups. And, in the spirit of transparency (one of our guiding principles and an ideal I haven't been maintaining as well as I could of late), I want to share, to talk about where SEOmoz is today and why we've decided to explore additional capital opportunities. In fact, I feel compelled - because even if only 100 people, or 10 or just 1 learn something here they can apply to themselves, it will be worthwhile.

A Brief History

Let's start back in August of 2007. SEOmoz was tiny - 8 people growing a business out of a 1,000 sq. ft. office in Seattle's University District (man, do I miss that place) and two people who believed it was going to be much, much bigger - Kelly from Curious Office and Michelle from Ignition. It's only in retrospect that I can really appreciate their foresight, because when they invested $1.1 million in the company that November, I was an SEO geek who wanted to use that funding to solve an SEO problem. My dream was to better understand the web's link graph and how the engines could use that to rank sites & pages. I should have been thinking about the problems faced by those wanting to do SEO and how a scalable, technology solution could be used to help them - like what Vanessa Fox did when she built Webmaster Tools inside Google (more on that later).

Our first round of capital raising was very unique, and for that reason, may be less applicable than other advice on the topic. Nevertheless, I'll try to share that experience and the macro and micro-economic factors that impacted it.

You can see that not only was 2007 the most active year for venture capital investment, but that Q4 of 2007 was a particularly high spike. It's probably not surprising that SEOmoz took its funding in this type of environment - possibly the best time to raise money from an entrepreneur's perspective since 2000. Why? Because when deal flow is very high, terms tend to be more entrepreneur friendly. Ours certainly were.

It's uncommon (though not unheard of) for a firm like Ignition Partners, with over a billion dollars under management, to put so little capital into a company. Between Ignition & Curious, the amount raised was $1.1 million, less than half the size of their next smallest public investment (Crunchbase has a list here, though SEOmoz's funding amount is inaccurately reported as $1.25 million, and the participants inaccurately listed as 1 - and Ignition does do some smaller deals that aren't listed). Quantity wasn't the only outlier - our valuation, the terms themselves (things like vesting, board structure, preferences, etc.) were very good and the deal closed quickly. Today's funding environment could be a very different story. As you can see from the charts above, the floor fell out in the VC markets last October, and although May 2009 may have been a step forward, entrepreneurs who seek capital today shouldn't expect seed or series A rounds to look the way they did in November of 2007.

SEOmoz was also helped in this deal by an important factor I think every startup should consider - WE DIDN'T NEED THE MONEY. We were already profitable and growing, already had a brand name in the industry and had attracted interest from multiple investors. I think that every entrepreneur who's considering startup-dom should think about establishing those goals before they go for institutional capital - a profitable, growing company with a product that's on the market and a brand name that's well known makes you:

This psychology is so powerful that I can't imagine doing it any other way. If I wanted to build a travel portal to take on Kayak.com, I'd start a great travel site (maybe even just a really interesting blog), build up some brand recognition, use advertising or low-cost premium features to drive revenue and only after those numbers made for a compelling story, approach investors. I'd use that same formula even for a capital intensive business - start with cool ideas, great writing and valuable resources, become a hub for your industry, show web traffic and positive interest, then go fundraise.

We started as a consulting business - in fact, SEOmoz is on a .org TLD because when I started the site, there wasn't even a business behind it (even the name "moz" comes from the ethos of open sharing pioneered by folks like DMOZ & the Mozilla foundation). Gillian and I were running a website design & development shop and learning SEO because our customers needed it and we had no other choice. Eventually SEOmoz got so big and popular as a blog that it made sense to conduct business under that name, and a few years later, we realized consulting wasn't the right way for us to scale this incredible community around us. Those decisions - made much more by accident than grand vision - gave us the credibility and the story that made investors excited.

And yeah, it didn't hurt that Q4 of 2007 was probably the best time to raise money in the last 8 years.

How Outside Capital Helped

Taking the outside investment proved to be an excellent decision, and, to be honest, even in today's market, I'd still consider raising money if I were in the same position again. Outside capital made me a better entrepreneur, focused our company more seriously on the things we needed to do and made us more accountable and metrics-driven. Some companies feel that pressure internally and can build those processes without external help. We needed that external pressure and it's been remarkable. I'll try to detail some of the big ways investment has helped us:

Metrics Requirements - Any outside investor will require reporting of specific data points about the business from financial, HR, marketing and development perspectives. You're probably doing this already inside your business, and we were as well, but experienced outside perspectives distill the list into the critical pieces, identify important missing criteria and work with you to help develop the raw numbers into actionable data.

Accountability - A lot of CEOs and company leaders choose that job because it means they're in charge. And while that's certainly an enjoyable perk, bringing in outside investors makes you accountable again - not in the same way a typical boss does, but the responsibility and pressure to perform. In many small companies, very few people beyond the CEO and perhaps one or two others are fully aware of the company's performance or lack thereof - and when things go south (or simply don't go as well as predicted), no one's there holding your feet to the fire. If external pressure can help you excel (as it has with me), then funding provides a great benefit.

Board Meetings - Rarely in small companies does leadership take a regular hard look at their priorities, strategy and direction (Will & Duncan, you're the exception, not the rule). Board meetings provide that gut-level check on every facet of the business, and let you step back to see the forest for the trees. They're not necessarily fun, but they will make you a better entrepreneur (and if they don't, it means you've likely chosen the wrong board members).

Thinking Long Term - Running a business is incredibly hard, and startups, doubly so. With so much time and energy devoted to turning the flywheel, it's easy to miss an opportunity or ignore a fundamental problem that's outside the scope of the day-to-day. Professional investment means you've got a partner watching out for precisely that issue.

Adding Experience to the Team - Every new person we add to SEOmoz, that's the biggest team I've ever led. Every dollar of revenue that comes in is the most money I've ever managed. With outside investors, they've seen and been through much bigger and can help guide you along the path - whether it's filled with potholes or littered with opportunities that just need to be scooped up.

Networking Opportunties - VCs know a lot of very important people. From strategic operators at big companies to C-level executives at startups to government, charity and press, you'll rarely find a more connected group. This shouldn't be surprising, as networking is one of the biggest value-adds VCs advertise. The problem is that for most entrepreneurs, myself included, the need for these networks is few and far between, so it seems less valuable than it really is - once your company is in a position to either do big enterprise partnerships or be acquired, those connections can "make or break" the firm.

Oh Yeah, the Money - Did you know VCs also provide capital? Yep, it's true - and having dollars to spend when you're a creative entrepreneur with a great plan is pretty awesome.

There are probably a dozen more ways that venture capital investment has helped SEOmoz, and I'm certain that many of them will be immeasurable and possibly even invisible. All of this isn't to say that VC doesn't have it's downsides - there are a few, and it pays to be aware of them:

Funding is a Time Suck - I'm personally feeling this right now (as I'll explain later), and it's important to be aware of the opportunity cost of seeking investment. For most startups, the CEO and the executive team are essential to running day-to-day operations of the business. When you take time out to build slide decks for investors, meet with VCs, network amongst your contacts and field calls, it pulls time & energy away from the company.

Control of Your Business is Diluted - VCs build company boards. In our scenario, the board is comprised of three voting members (Gillian, Michelle & myself) and one observer (Kelly). This structure means that company management and founders have the deciding vote in any contentious issue (only one has ever arisen on SEOmoz's board). In a future round, though, we expect that another 2 members would join the board - one individual from the investment firm and one independent member we all agree upon. Just to be clear, though - even in our scenario, there are certain types of votes which must pass with 100% of the board's approval (mostly things like sale of stock, funding, etc.).

You Have a Boss - OK, it's not a typical boss and you don't report to them on a regular basis, but you do have someone who watches your metrics and performance closely and can replace you if/when that performance is unacceptable. One of the most significant powers the board holds at any VC-backed company is the ability to fire the CEO.

You Have Fiduciary Obligations - Legal documents bind you to operate the company with its interests, not your own, at the heart of your decisions. This impacts quite a bit of the decisions you make at a company, particularly when you switch from something like a longtime, family-run business (such as ours). It's definitely good for the company (and good for your own internal discipline), but it can be painful at times.

Your Exit Options are Limited - Retire, walk away, close up shop, sell for a low price because you don't want to go out for higher bids or you particularly like the buyer - these options (and many others like them) become challenging to impossible, once you take outside investment.

As you can tell from my opinions above and my previous advice to myself, I'm a big proponent in spite of these potential detractors.

2007-2009 Growth

This company looks very different than it did just 2 years ago, and I've been lax in sharing the kinds of numbers and data about the business that was once a signature of my blogging (see 2006 and 2007 financials, for example). While there's a lot that I'm obligated not to share, I'm going to go right up to that line - not just because I think it will make this story more interesting, but because it's part of our guiding principles.

Full-Time Employees

It's tough to build this chart, because the number of full-time folks fluctuates even inside a single year, but I've done my best to approximate the annual averages.

PRO Members

PRO membership has really taken off in the last 6 months - and while we doubled membership from 2007-2008, we were able to do that in just the first 6 months in 2009.

Revenue

Sadly, while I can't share exact numbers, this chart does give an accurate concept of where we are. 2009 is shaping up to be a very exciting year. Although I also can't show margin numbers, I will say that from Nov. 2007 to Nov. 2008, SEOmoz burned capital (approx. 3/4 of the investment we took). Starting in Dec. 2008 and continuing each month through to June 2009, we've been profitable and rebuilt a respectable cash reserve (of course, if you ask Sarah, we still need to sweat every penny of it).

Visits to the SEOmoz.org Website

Traffic is growing nicely as well, though what this chart doesn't show is that 2009 has been virtually devoid of the types of "linkbait" that were a hallmark of the site in 2007 (and much of 2008). We've found that while those efforts can produce great traffic boosts and link growth, we need to focus on conversion rate optimization and the PRO membership product before we return to viral content generation.

A (Not-So) Short Story that Led to a Decision

Last October, just after we launched Linkscape, SEOmoz started fielding between 2-4 calls per month from venture capital firms seeking to place investment. These are exciting, flattering and fun calls to get, and in those initial conversations, the focus makes for an ego-padding chat. It's pretty easy to see why these investors were so interested - no, not because SEOmoz itself is all that awesome (they didn't even know much about us when they called) - it's because of the potential market for SEO:

A predicted spend of just over $2 billion on SEO in 2009 suggests that SEO may finally be earning some respect, just as the growth in PPC spend slows its acceleration rate. Richard Zwicky's SEM analytics company, Enquisite, is an example of this market shift commanding respect. Enquisite's raised over $11 million in venture capital in the last few years (including a series B round of $8 million in February) . His favorite mantra is the disconnect I wrote about last october:

Despite these inquiries, our board meetings in October & November were very operational and tactical. We were at the tail end of turning around from cash flow negative to positive, and there were some high stress moments, capped off by a working "product" meeting in early December. At that roundtable, I presented some concepts for SEOmoz's future product direction and got shot down. And thank goodness I did.

The problem with entrepreneurs like me is that our creativity, emotional attachments to technology and love of product "coolness" can sometimes get in the way of making things that real people find really usable & useful. When that happens, it's even more essential to be surrounded by smart, secure people who feel up to the challenge of challenging you.

After the meeting ended, I spent a lot of time thinking strategically about where we needed to go. That thinking ended up in dozens of notepad pages, and I've shared a few below:

My goal was to get to the core of the "SEO Problem" with a software product, and luckily, I didn't have to go that road alone. Adam Feldstein, a longtime friend of mine, joined SEOmoz in January and we spent an entire week together in the mozplex's meeting room, diagramming a product evolution we've come to call "Turbomoz" internally (much as we did when Linkscape was called "Carhole").

Adam and I presented a walkthrough of our new plan in early April to a packed room, including the SEOmoz board and several internal folks. The feedback was terrific - they loved not only the product itself, but the simplicity, the design, the intuition behind it and the potential to reach a lot more of the market than just the intermediate-to-expert level SEOs that make up the majority of our members today. An early version of "Turbomoz" is set to release in by the end of 2009.

A few weeks later, I headed to Boston, where I got to spend a lot of time with a great friend and mentor, Dharmesh Shah, the founder of Hubspot and blogger at OnStartups. Dharmesh and I talked a lot about our two companies - how they're growing, what the economic downturn has impacted, where we see opportunities and what makes a startup successful. It was a tremendous learning experience, and something I can't recommend enough to others. If you're currently running a business and can find someone with a similar model who's willing to exchange information and ideas, do it. Being a CEO can be a very lonely job - even close friends and family won't be able to empathize in the same way another CEO can. Many cities even have startup support groups (although they're not usually called that, exactly).

My visits with Dharmesh inspired me to be more self analytical and more self critical. If there are things in the business that aren't working, places where opportunity isn't being executed upon, and chances to make a difference, I owe it not only to myself, but to our investors and, most importantly, to my employees to make the change. As the late King of Pop said, "start with the man in the mirror."

Just a couple weeks later, I landed in San Francisco. If you haven't read the back-and-forth between Silicon Valley vs. Seattle VC/entrepreneur/tech startup, check out Glenn Kelman (Redfin's CEO) comparing the two, Michael Arrington responding & Glenn firing back. There's a grain of truth to the staments they make:

Sure Seattle is beautiful (Kelman talks about lakes and outdoor stuff a lot in his post). And if you want to have a balanced, healthy lifestyle, that’s a great place to do it. If you don’t think you have what it takes to make it in Silicon Valley, maybe Seattle or other mini-tech hubs is the place for you. But the best of the best come to Silicon Valley to see if they’re as good as the legends that came before them. It’s a competitive advantage to be here. And if you aren’t willing to take advantage of every possible advantage to make your crazy startup idea work, perhaps you shouldn’t be an entrepreneur.

The "valley culture" of depriving oneself of everything else except work really does exist, and it's easy to become both enamored and afraid of it very quickly. But I also agree with Glenn that:

So even though all of us in Seattle would probably concede that Silicon Valley is generally better for startups than anywhere else, that doesn’t mean that we have to agree with Michael that Silicon Valley is always better, or better in every way. For starters, people in Seattle have helped me in an open-hearted, small-town way that I might not have found in the Valley.

I was very lucky to get some of that same "open-hearted, small-town" help, even in the Valley. A few years ago, Michael Eisenberg introduced me to Nirav Tolia, a former EIR with Benchmark, and the two of us have become fast friends. Nirav's just completed a test release of a great startup - Fanbase (should be launching formally in a few months) - and has introduced me to a number of terrific entrepreneurs, nearly all of whom have great interest in SEO. At dinner one night, a fellow CEO (Thomas Layton of Metaweb), crystalized the question that had been weighing on my mind for the last 8 months - should SEOmoz take another round of funding?

Here, word for word (to the best of my memory), is what Thomas said to me:

Let's make this easy. I'll give you three things, you prioritize them, and I'll tell you whether you should take the money.

Do you want to be the CEO and in control of the company's destiny?

Do you want to make the most possible money from an exit?

Do you want the company to achieve the most and become the most it can be?

I don't actually remember which one I picked on the spot... I think I struggled a bit to be confident in my response, and that's because honestly, I hadn't been asking myself that question, even though it's something every CEO/founder should inherently know. A few days later, though, the answer was clear - #3. I want SEOmoz to be all that it can be. I believe in SEO. I believe in the people here. And I believe that with the right help - and another dose of all the positive things our first round brought us - we can achieve even more remarkable things.

Thus, we're exploring the VC path, talking to those folks who've been calling and thinking a bit more seriously about a series B. It's not something we're definitely pursuing, and plenty of circumstances could change our minds about whether it's the right option. As the media is quick to remind us, valuations and deal terms are not great right now, and with SEOmoz in such a strong position, we can afford to be patient, be picky and choose the right partner.

What I've Learned About Myself

I do well with external pressure, even when it's critical. I think that comes from childhood, when my Dad was obsessed with my grades and it made me work harder.

I get inspired by those who've achieved amazing things. I want to meet more people like that and spend time with them - it's a remarkable experience.

I need to do a better job of thinking long term, even when I'm mired in the day-to-day. CEOs are supposed to be visionaries, and it's irresponsible for me to be slacking off.

I need to find ways to outsource more of my personal workload and trust others to do as good a job or better than I could.

My stubborness is sometimes useful, but I need to do a better job of letting go when the situation warrants.

I'm so lucky - so much luckier than I've ever considered - to be where I am. Thankfully, it appears I'm not alone - if Malcolm Gladwell's Outliers (worth reading, BTW) is right, everyone who gets to do these kinds of exciting things in their lives owes that opportunity to the people around them, and I'm no different.

My Top Advice for Other Entrepreneurs

Don't be too scared of taking venture capital - it gets a lot of negative press, but in the end, you and the VCs want exactly the same thing - for your company to succeed magnificiently.

Find VCs you love to work with - people you want to be friends with and spend time with and drink beer with. Find people who care not just about your company, but about you personally. I think this has been the best part about Michelle & Kelly on our board - they don't just care about the numbers. They care about us. Seriously consider being flexible on deal terms if it means working with the right people (though often those "right people" are the same ones who'll give you the best deals).

Be relentlessly self-analytical and self-critical. Work hard to identify your flaws and pad them with team members who can compensate. My relentless optimism and cavalier march to spend money to grow the company is tempered by Sarah's risk intolerance. It's a great balance, and every company needs it.

Leverage the entrepreneurial community around you. If my experience is any guide, CEOs and startup founders love to help and guide others - and that culture isn't limited to Silicon Valley or Seattle or Boston, either. I've had friends from New York City to Reykjavik to Shanghai, Sydney, London and Nashville lend their time, their networks and their advice. I only hope that I can do as well to help others.

Questions & Answers

In the spirit of this post, and of SEOmoz's guiding principles, I'd like to open the comments to questions and offer to answer anything I reasonably can in a post next week. You can also feel free to email me if you have private questions. One quick thing I'll say is that for those seeking VC, three resources have been of great help to me - OnStartups, VentureHacks and Hacker News.

I sincerely hope this blog post has brought you value and helped bring a little more transparency to a world that's rarely seen outside of Sand Hill Road meeting rooms.

Very interesting post - possibly the best I've read on here. Although I don't want to hijack a great business thread on a sub-point, I would like to pick up on one point in particular:

Regarding SEO vs. PPC disequilibrium; I personally feel this is being exaggerated somewhat, due to the difficulty in accounting for 'SEO'. As Will pointed out last October, PPC spend is much easier to count, while for SEO it's difficult.

Is the 'web agency' that now spends 90% of their time on SEO counted towards SEO or IT? What about internal developers? Does the copywriter's bill get apportioned to SEO? And what about those followed 'media buys' that some companies are doing that are taken from the CPM budget?

Even when it's all counted how do you account for the time value of money? PPC is instant whereas SEO takes time. And when you factor in risk, the attractiveness of SEO vs. PPC on a given keyword/product/page can become drastically different. Maybe I should do a YOUmoz on this because it's a huge topic.

All that said, I'd still agree that SEO is delivering a better ROI than PPC right now and that it's still where the wise money is going. Nevertheless, I'd hate to think there's tonnes of VC's running around desperate to invest in SEO because they think it's going to increase ten-fold, because they are heading for 2000 again IMO.

Perhaps the smarter money is going into helping making SEO as attractive and accountable to marketers as PPC. No wonder Enquisite got the money in that case.

Matt - yeah, I think there is some truth to that, but I'd say that to a large degree, the same phenomenon holds true with PPC. You have to build the landing pages for those ads, build in the analytics and split/multi-variate test systems, set up the conversion process, etc. so PPC is not free from those constraints either.

While I'd say that there's costs both ignore, I think both data-wise and circumstantial evidence suggests the split is massive - maybe not as big as the surface-level numbers show, but still huge.

I've had good and bad experiences with funding..and I think you highlight a critical point here.. some VC funds come with very little other than the cash and a focus on when the return will come.. as a young entrepreneur what I really needed was cash + mentoring not just the cash.. the rapid growth we delivered was a chaotic and stressful experience.

Just at the point we parted company with our funders I gained acces to a business mentor whom we later invited onto our board and who now acts as chairman. This has given me many of the things you mention.. a boss, access to experienced busienss advice, someone to 'hold your feet against the fire' all of which are vital to sucess and to the person running/leading the operation.. so I'm not sure that VC funding is the only solution/way to gain access to the list of learnings you provide here.. if you can find a bank willing to support (which we now have) and bring on experienced board members (you'll need to incentivise them with equity to get full commitment) you can access both funding and senior expertise without going the VC route.

Just thought this might show readers that there is more than 1 way to fund growth and get access to a more senior board to help you to manage that growth but even this route isnt without its challenges.

Having bootstrapped and sold a site, I'd add another option to Thomas's list:

4. Do you want to be able to sell your company when the time/valuation is right for you?

We had a very profitable, growing site when we sold our company in Q2 07 (which was probably the peak of the web content acquisition market), and had we taken funding, I'm not sure the deal would have happened.

This is speculation, but my guess is most investors would not have been thrilled about an exit below $50M. But if you own 100% of that, even a $20M exit is fantastic if it's all yours and the multiples are high. Plenty of the management of VC-funded companies never do that well.

So it's a catch 22. If you wait until you have a successful cash flowing venture, you're going to be faced with a choice between a) getting better VC terms, and b) wondering why bother.

I raise the point because I think some people may automatically dismiss the first option (Do you want to be the CEO and in control of the company's destiny) without thinking through what it really means to their lifestyle and risk profile.

The guy who raised VC at $20M valuation and then crashed and burned the company trying to hit $100M exit has the same net worth as the guy who never did anything at all.

An excellent point - entrepreneurs can exert a lot of pressure in a sale opportunity, but in bad deal terms (particularly those with greater than 1X liquidation preferences), you can be locked into some ugly scenarios if you don't plan ahead and manage risk.

Just want to make the point that BURN is in fact a four letter word. It should be avoided if possible. Else keep it as low as you can. Because BURN = LOSS OF CONTROL.

People, usually VCs, make the argument that you need to BURN to scale up. This is not true. It is just as easy to grow a company fast and be profitable at the same time. Especially software companies that can now go SaaS to avoid up front capital expenses and then spend as they earn by hosting on services like Amazon AWS etc.

As an entrepreneur myself who has raised VC money, I would say a company's success is more often tied to to the founders staying on (at least for the first few years) in leadership positions to keep the company focused and executing, than on VC investment.

So keeping control is not a bad thing promoted by egotistical founders. In fact, most of the time it is just what the doctor ordered for the company's long term health (especially if you hit a few bumps along the way) and should be an explicit goal.

I've seen a few mentions about SEOmoz's recent focus on conversion rate optimization in some of the blogs, but I haven't been visiting for long enough to be privvy to the changes.

Looking at your graphs - I've noticed that while the pro memberships approximately doubled from 2.5k to 5k in the first half of '09, the monthly unique visitors to the website went up from ~210k to ~240k; a roughly 15% increase. To me that's screaming of implementing a much more effective conversion funnel, or am I missing something?

Further, I imagine that with figures such as these then the ROI for this conversion optimization work would be strongly positive - as is partially evidenced by your huge increase in projected margin for '09.

IMO, conversion optimization is a massive low hanging fruit for a lot of sites, and therefore also for online marketing practitioners. An increase in conversion rate has an immediate effect upon the ROI of SEO/SEM and similar type efforts - it's much easier to make traffic acquisition figures stack up for a site converting at 5% than it is for one converting at 1%.

Driving visitors to a site is one thing, but what you do with them is just as important.

You converted me to a PRO member, but would you have converted me in the latter half of 2008? I'd love to hear your thoughts on Maing's question.

JoosE is right on track - I think the two biggest things have been #1 - improvements in marketing (emails, landing page optimization, etc.) and #2 - product improvement (Linkscape has really taken off in value with the last few indices in size & scope, the Rank Tracker tool has been very popular, Labs is getting people excited, etc.).

SEO-Doctor (not that I'm giving anything away but) remember that many members opt for annual membership, and many are also still on legacy pricing (those $39 and $49/month members who signed up early and locked in their prices). Thus, while your numbers aren't way off, the devil's in the details (as it usually is).

Echoing all the others. I love mozstuff for the tactical assistance, but Good Lord, this was indeed a let your hair down piece. The amount of comments on a weekend while facing a short week is proof of that. Well done!

Two comments and a question:

Spot-on about mentors and discussing business models: At PubCon South this year, I talked with Gillian a couple of times, but once in good detail about the issues facing an SEM agency catering to small (micro, sometimes) businesses. Several things she said were so powerful that I called my partner and a board member. We didn't do exactly what she suggested, but she started us down the path.

Likewise, I know Nirav and many at Fanbase well. One of the people I respect most in that part of the world recently said, "I've learned so much working with him."

Because we're subject matter experts, we have a tendency in this industry to get a little know-it-all. Staying humble and listening is important as you said so well. We miss it sometimes, but the perspective of those who do what you do is critical.

George; "We need to bring on an account manager."

Board member: "Which client is paying for them?"

George; All of them. We spl---

Board: Doesn't work that way, chum.

Be careful where the money comes from: Sure, there are good to great reasons to take VC money and just as many not to do so. I've been in two companies where the VC requirements for an exit hurt the business model. One firm actually imploded and lost hundreds of millions. Not sure why the other didn't. Hasn't. Yet.

Question: When I talk with our Board, I feel a level of accountability to provide solid business cases. When I'm doing the day-to-day, I just have to convince the client and my partner. Maybe a developer, but they never believe me. ;-)

Does having folks involved who don't have a typical mozzer's knowledge base make those decisions run longer? I found that when I had to explain things like the concept behind inbound linking to justify resources that the request got tangled up in the weeds.

George - great points, and great question at the end. I think we've been lucky to have board members who really "get" SEO and understand the marketing field - they're also very willing to let me make my own mistakes so that I can be better "led to water" - I didn't realize how well my board members knew me and knew how to make their relationship work well with me until recently :-)

Speaking with no insider knowledge here, I imagine this was were they 'spent' the VC money on infrastructure and development costs before the growth in PRO membership resulted in profitability again. If there was no plan to spend it (which implies a period of unprofitability) there would have been little point having it, I guess...

Linkscape was developed during this time, and that cetainly ate up a lot of capital. It turns out the Internet is really, really big.

And yes, as Will notes, this was precisely the plan when we took the original investment. VC is intended to be spent, so a burn rate is a normal, positive part of taking investment, as is turning back around to profitability.

Thank you so much for writing this post. As a life coach and personal development enthusiast, it's inspiring to see you on this path. I encourage you to continue striving for greatness both externally and within yourself.

We all have absolutely unlimited untapped potential. No matter how high we rise the ceiling remains unlimited. From what I hear you say, you've come to recognize this and are consciously choosing to move outside of your comfort zone.

If I could make one recommendation it would be to consider working with a life/executive coach. The things you mentioned: long-term goal-setting, clarifying vision, delegating unto and empowering others, and passionate detachment are all subjects in which most coaches are trained.

I had the good fortune of getting to work with a life coaching group. Initially my focus was strictly on marketing the business. I loved working with the people so much that I chose to go through a year of coach training. Doing so was the best decision of my life. I can say with full integrity that those experiences have exponentially increased my physical, mental, emotional, and even spiritual wellness.

Keep up the great work Rand. It brings a smile to my face to know that there are people like you in the world.

Actually - yes - I don't know that we have talked about it much, but Duncan and I are working with a business / life coach (the two are hard to separate sometimes!). It has definitely helped us. Brings something different to the informal mentoring relationships and the formal board meetings.

Rand, great great post. I moved to Silicon Valley last August with a startup and yes, absolutely, everything fell apart in October. Halfway through the post I thought you were about to announce you were moving to the valley and was very excited, but you seem settled in Seattle.

In the spirit of transparency, how did the Feb one-month Pro special rate help with membership? (Sorry if you have written about this before)

It was definitely a big part of our gain, but organic growth has been really solid, too. I think stats show something around 40% of the $1 offer members stuck around until now, which is absolutely awesome. I'm always really critical of our products, but it goes to show that a lot of people love the PRO membership - even our exit surveys suggested that those who left planned on signing up in the future next time they needed to do SEO (which is humbling, inspiring and a credit to the team here).

I was wondering (for PRO memberships, not consulting) how you determined your price structure. Many times, there's a fine line between what people are willing to pay, and what you need to turn a profit. I'm curious what the process consisted of for SEOmoz, did you do any market research?

As a corporate and IP attorney, I wish all of my startup clients would read this post and take the lessons to heart. Tremendously insightful and self-aware. VC's will be knocking down your door for years to come. Enjoy the ride.

It almost seems like money is one of the last reasons you choose to get funding...oversight and accountability seem to be even more important. Not many CEO's can admit that they need to be kept on track. I guess that's part of what makes you successful.

I don't know if that might a be a good idea to ask off the topic question here or not? But I am really looking forward to have some guidance to optimize and marketing tips for Legal Startups. It's kinda a B2B in our case Startup to Startup legal guidance service starting from business formation to legal documents how to videos. Any resources or links to authentic to the point articles will be appreciated.

Rand as always appreciate the openness mentality of your business! As for VC I'm fascinated with how the industry works, although I'm not sure if I'm the type that it would work well for. But, again I haven't yet been in the position to recieve such an honor...

This continues to be one of the great differentiators to SEOmoz. These insights provide a view behind the curtain, sometimes unprecedented, and provide a glimpse at the glory as well as gut wrenching challenges.

This kind of sharing is always interesting in general since so many of us are connecting into the industry, but is especially touching to the readers because this isn't just a blog or a company that we follow, but a community that we are a part of and in our own ways, deeply invested in.

For what it is worth, I don't think any of us are surprised that

#3 Do you want the company to achieve the most and become the most it can be?

was your choice, or that you took time before answering it...it's a question that can be answered quickly for what sounds good, but a true answer only comes after deep and real contemplation.

It's hard to sound balanced and fair after reading posts like this Rand. I will probably come across as Rand Fan Boy #1 but it needs sayin'.

This was one of the most helpful posts from you in a while. It's always nice to hear what goes on in your head, but the real gold of this post is the business aspect.

While I won't be dealing with VC capitol (at least not in the forseeable future) many other aspects of having your own business were addressed in this post. You've given me inspiration, ideas and motivation to reach farther for my goals.

Do you find that there is a better profit margin in your "actual" SEO work for client websites compared to the margin you get from pro membership/sales of products from SEOmoz.org? If so, do you allocate time and resource to these accordingly?

Just wondering what the split was in how your team manage their time between maintaining SEOmoz.org and working on client SEO work.

Great post Rand - I think you can remember WHY transparency is one of your guiding principles, it's because the community loves it.

We've been privilaged to work closer than most with SEOmoz and it truly is a privalege. It'll be exciting to see what happens with both Distilled and SEOmoz over the coming months/years - there's so much great stuff and both companies are lead by very talented and clever people.

For somebody that is relatively new to the online marketing industry, your posts always seem to inspire and push me deeper into the void that is search marketing.

Its content like this that makes me want to learn everything there is to know about search and apply them to working websites, knowing that what i have learnt will help clients make more money and grow my personal experience.

Keeping motivated must be one of the most difficult things for alot of people to keep in their jobs, but you seem to ooze enthusiasm after all these years which is really infectious.

Keep it up Rand, its all good stuff! Good luck to the coming years, im looking forward to growing and having SEOMoz there as i go along.

Glad to see that SEOmoz has grown to the level of success that it has. I also appreciate the tips on being an entrepreneur. What a wonderful, albeit scary experience. I'm sure this has been for you and the rest of the moz crew.

Rand, it was a pleasure to have a quick chat with you at SMX Advanced more about different business models. Its great to see that there is still a great future for other entrepreneurs to build a brand and launch quality products but im not sure that everyone is in the posistion that SEOmoz is to raise $1.1 million.

Im sure many clients would be very interesting to read that conversions is key to business growth not just traffic even for a seo blog...

Tough to say off the top of my head, but we did have a very successful email campaign in March that helped grow membership (though Dec-Feb and April-June haven't featured any specific email pushes for PRO and still saw good growth).